Core Viewpoint - Oaktree Specialty Lending (NASDAQ: OCSL) experienced a significant decline in net investment income due to a shrinking investment portfolio in the third quarter, leading to serious coverage issues [1] Financial Performance - The company reported a considerable decrease in net investment income, indicating potential challenges in maintaining profitability [1] - The decline in investment income is attributed to a reduction in the size of the investment portfolio [1] Coverage Issues - Oaktree Specialty Lending is facing serious coverage issues as a result of the decline in net investment income, which may impact its ability to meet financial obligations [1]

Financial Data and Key Metrics Changes - The adjusted net investment income decreased to $32.5 million or $0.37 per share, down from $38.7 million or $0.45 per share in the prior quarter, primarily due to nonrecurring and noncash items related to refinancing activities [25][27] - The net leverage ratio at quarter end was 0.93 times, flat from last quarter, with total debt outstanding at $1.46 billion [28] - The weighted average interest rate decreased slightly to 6.6% from 6.7% at the end of the prior quarter [28] Business Line Data and Key Metrics Changes - The weighted average yield on new debt investments was 9.1%, compared to 9.5% in the prior quarter, reflecting continued tight spreads in the marketplace [13] - The median EBITDA of portfolio companies was approximately $161 million, a $3 million increase from the prior quarter [17] - The weighted average leverage in the portfolio decreased slightly from 5.2 to 5.1 times, while the weighted average interest coverage increased from 2.1 to 2.2 [17] Market Data and Key Metrics Changes - M&A activity remained muted due to uncertainty surrounding increased tariffs, leading to a pivot towards refinancing existing debt rather than new buyouts [8] - Credit spreads tightened, with pricing for large cap sponsor loans in the SOFR plus 425 to 475 basis points range [9] - The company is observing increased opportunities in Europe, supported by a strengthening economic outlook and favorable valuation metrics [11] Company Strategy and Development Direction - The company is focused on high-quality companies with strong credit profiles and is selectively deploying capital into mature market-leading businesses [15][16] - Oaktree's global platform provides a competitive advantage, allowing access to high-quality transactions often unavailable to smaller lenders [16] - The company aims to maintain a diversified portfolio while avoiding industry concentration risk and steering clear of more cyclical businesses [16] Management's Comments on Operating Environment and Future Outlook - Management noted that the long-term outlook for direct lending remains favorable, with compelling yields on a gross unlevered basis [12] - The company is actively engaged with management teams of challenged positions to drive favorable resolutions [21] - There is confidence in the ability to deploy capital effectively, supported by a robust pipeline of investment opportunities [41] Other Important Information - The company successfully amended and extended the maturity of its senior secured revolving facility, reducing the interest rate, which will reduce overall interest expense [6] - The company has ample liquidity of approximately $730 million, including $80 million in cash and $650 million of undrawn capacity on credit facilities [28] Q&A Session Summary Question: How were spreads generated this quarter? - The company achieved first lien spreads in the mid-500s, influenced by a mix of lower spread deals and higher yielding deals, including life science transactions [34][36] Question: What is the plan regarding leverage and discussions with rating agencies? - The plan is to maintain leverage at the midpoint of the range (0.9 to 1.25) and to engage actively with rating agencies regarding potential increases in leverage to support earnings [40][41] Question: Confidence in the base dividend level of $0.40 per share? - The base dividend was set at $0.40 based on visibility into prepayment activity and the progress made in converting non-interest earning assets into interest-earning assets [54] Question: What types of asset-backed opportunities is the company considering? - The company is looking at a diversified pipeline of asset-backed deals, including rental car leases and small loans for HVAC systems, while avoiding consumer unsecured debt [56][59]

Company Performance - Oaktree Specialty Lending reported quarterly earnings of $0.37 per share, missing the Zacks Consensus Estimate of $0.45 per share, and down from $0.55 per share a year ago, representing an earnings surprise of -17.78% [1] - The company posted revenues of $75.27 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 3.97%, and down from $94.97 million year-over-year [2] - Oaktree Specialty Lending has not surpassed consensus EPS estimates over the last four quarters [2] Stock Performance - Oaktree Specialty Lending shares have declined approximately 11.6% since the beginning of the year, while the S&P 500 has gained 7.6% [3] - The current Zacks Rank for the stock is 3 (Hold), indicating expected performance in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.40 on revenues of $79.18 million, and for the current fiscal year, it is $1.88 on revenues of $321.78 million [7] - The outlook for the industry, specifically the Financial - Miscellaneous Services sector, is currently in the top 26% of Zacks industries, suggesting a favorable environment for stock performance [8]

[Financial and Operational Highlights](index=1&type=section&id=Financial%20and%20Operational%20Highlights) The company reported decreased net investment income for Q3 2025, maintained stable NAV, and declared a $0.40 per share quarterly distribution [Key Financial Metrics](index=1&type=section&id=Key%20Financial%20Metrics) For the third fiscal quarter of 2025, Oaktree Specialty Lending reported a decrease in both GAAP and Adjusted Net Investment Income per share, primarily due to lower non-recurring fee and interest income, alongside higher one-time interest expenses. Despite this, Net Asset Value (NAV) per share saw a slight increase to $16.76, and the company successfully amended its credit facility on more favorable terms Key Financial Metrics (Q3 2025 vs Q2 2025) | Financial Metric | Q3 2025 | Q2 2025 | | :--- | :--- | :--- | | Total Investment Income | $75.3M ($0.85/share) | $77.6M ($0.90/share) | | Adjusted Total Investment Income | $74.3M ($0.84/share) | $77.2M ($0.90/share) | | GAAP Net Investment Income | $33.5M ($0.38/share) | $39.1M ($0.45/share) | | Adjusted Net Investment Income | $32.5M ($0.37/share) | $38.7M ($0.45/share) | | NAV per Share | $16.76 | $16.75 | - The decrease in total investment income was driven by lower non-recurring fee income, reduced interest income from lower OID acceleration and tightening spreads, and lower dividend income from the SLF JV I investment[4](index=4&type=chunk) - The company originated **$147.2 million** of new investment commitments while receiving **$249.4 million** from prepayments, exits, and sales, indicating a net reduction in the portfolio size during the quarter[4](index=4&type=chunk) - Total debt to equity ratio was **0.99x**, and liquidity consisted of **$79.8 million** in cash and **$650.0 million** of undrawn capacity under its newly amended credit facility[4](index=4&type=chunk) [Distribution Declaration](index=2&type=section&id=Distribution%20Declaration) The Board of Directors declared a quarterly cash distribution of $0.40 per share for the third fiscal quarter of 2025 Distribution Details | Distribution Detail | Value | | :--- | :--- | | Distribution per Share | $0.40 | | Payment Date | September 30, 2025 | | Record Date | September 15, 2025 | [Results of Operations](index=3&type=section&id=Results%20of%20Operations) The company's GAAP net investment income decreased to $33.5 million ($0.38 per share) from $39.1 million ($0.45 per share) in the prior quarter. The decline was primarily driven by a $2.3 million decrease in total investment income and a $3.5 million increase in net expenses, which included one-time costs related to the amendment of its credit facility Consolidated Statements of Operations (Selected Metrics) | ($ in thousands, except per share) | Q3 2025 (ended Jun 30) | Q2 2025 (ended Mar 31) | Q3 2024 (ended Jun 30) | | :--- | :--- | :--- | :--- | | **GAAP Results** | | | | | Total Investment Income | $75,271 | $77,568 | $94,966 | | Net Investment Income | $33,481 | $39,055 | $44,575 | | Net Investment Income per Share | $0.38 | $0.45 | $0.54 | | Net Increase (Decrease) in Net Assets | $38,352 | $(36,249) | $1,120 | | **Non-GAAP Results** | | | | | Adjusted Total Investment Income | $74,297 | $77,195 | $95,573 | | Adjusted Net Investment Income | $32,507 | $38,682 | $45,182 | | Adjusted Net Investment Income per Share | $0.37 | $0.45 | $0.55 | - The quarterly decline in adjusted total investment income was mainly due to a **$1.5 million** decrease in non-recurring fee income and a **$1.2 million** decrease in interest income[7](index=7&type=chunk) - Net expenses increased by **$3.5 million** quarter-over-quarter, primarily driven by **$2.9 million** in higher interest expense, due to the one-time acceleration of deferred financing costs from amending the syndicated credit facility and terminating another[8](index=8&type=chunk) [Portfolio and Investment Activity](index=4&type=section&id=Portfolio%20and%20Investment%20Activity) The investment portfolio decreased slightly to $2.8 billion, maintaining high first-lien debt concentration, with minor declines in joint venture investments [Portfolio Overview](index=4&type=section&id=Portfolio%20Overview) As of June 30, 2025, the investment portfolio was valued at $2.8 billion across 149 companies, showing a continued focus on first-lien debt, which constituted 81.1% of the portfolio. The number of investments on non-accrual status remained at ten, but their proportion of the debt portfolio's fair value decreased from 4.6% to 3.2% quarter-over-quarter Portfolio Metrics | Portfolio Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Investments at Fair Value | $2,809.4 M | $2,892.8 M | | Number of Portfolio Companies | 149 | 152 | | First Lien Debt (% of portfolio) | 81.1% | 80.9% | | Non-accrual (% of debt at FV) | 3.2% | 4.6% | | Weighted Avg. Yield on Debt | 10.1% | 10.2% | - The portfolio consisted of debt investments in **128** companies and equity investments in **41** companies, with **22** companies having both debt and equity investments from OCSL[13](index=13&type=chunk) - The percentage of floating-rate debt investments increased to **90.9%** as of June 30, 2025, up from **89.8%** as of March 31, 2025[10](index=10&type=chunk) [Joint Venture Details](index=5&type=section&id=Joint%20Venture%20Details) The fair value of investments in both the SLF JV I and Glick JV experienced slight decreases during the quarter, primarily due to the use of leverage and underlying portfolio losses. Both joint ventures continue to be leveraged, with debt-to-equity ratios of 1.4x and 1.3x, respectively [SLF JV I](index=5&type=section&id=SLF%20JV%20I) SLF JV I's fair value decreased slightly, contributing cash interest and dividend income to OCSL while maintaining a 1.4x debt-to-equity ratio - The fair value of OCSL's investment in SLF JV I decreased by **0.8%** to **$127.5 million** as of June 30, 2025[16](index=16&type=chunk) - SLF JV I generated **$3.3 million** in cash interest income and **$0.5 million** in dividend income for OCSL during the quarter[17](index=17&type=chunk) - As of quarter-end, SLF JV I had **$358.0 million** in assets, a debt-to-equity ratio of **1.4x**, and **$73.0 million** of undrawn capacity on its credit facility[17](index=17&type=chunk) [Glick JV](index=5&type=section&id=Glick%20JV) Glick JV's fair value also saw a minor decrease, providing consistent cash interest income to OCSL with a 1.3x debt-to-equity ratio - The fair value of OCSL's investment in Glick JV decreased by **0.6%** to **$47.1 million** as of June 30, 2025[18](index=18&type=chunk) - Glick JV generated **$1.3 million** in cash interest income for OCSL, which was flat from the prior quarter[19](index=19&type=chunk) - As of quarter-end, Glick JV had **$128.5 million** in assets, a debt-to-equity ratio of **1.3x**, and **$31.0 million** of undrawn capacity on its credit facility[19](index=19&type=chunk) [Liquidity and Capital Resources](index=5&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company maintained a stable leverage profile with a total debt-to-equity ratio of 0.99x and a net debt-to-equity ratio of 0.93x. Liquidity remained robust with $79.8 million in cash and $650.0 million of undrawn capacity on its credit facility, which is deemed sufficient to meet unfunded commitments and pursue new investments. The funding mix shifted further towards unsecured debt, now comprising 65% of borrowings Liquidity and Capital Metrics | Metric | As of June 30, 2025 | As of March 31, 2025 | | :--- | :--- | :--- | | Total Debt Outstanding | $1,460.0 M | - | | Unrestricted Cash | $79.8 M | $97.8 M | | Undrawn Credit Facility | $650.0 M | - | | Total Debt to Equity Ratio | 0.99x | 1.00x | | Net Debt to Equity Ratio | 0.93x | 0.93x | - The funding mix was composed of **35%** secured and **65%** unsecured borrowings[20](index=20&type=chunk) - The weighted average interest rate on debt outstanding decreased to **6.6%** from **6.7%** in the prior quarter, driven by reduced interest rate margins from the amended syndicated credit facility[22](index=22&type=chunk) - Unfunded investment commitments totaled **$305.3 million**, with approximately **$264.4 million** (excluding JVs) available to be drawn immediately[21](index=21&type=chunk) [Non-GAAP Financial Measures](index=6&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP measures provide a clearer view of performance by excluding non-cash accounting impacts from mergers and certain incentive fees [Explanation of Non-GAAP Measures](index=6&type=section&id=Explanation%20of%20Non-GAAP%20Measures) The company provides adjusted (non-GAAP) financial measures to offer investors a clearer view of its ongoing performance by excluding the non-cash accounting impacts from the OCSI and OSI2 mergers. These adjustments remove the amortization or accretion of interest income and gains/losses resulting from the new cost basis established for acquired assets. Management uses these metrics internally for analysis and believes they align more closely with the economic earnings of the investment portfolio and the calculation of incentive fees - Management uses non-GAAP measures to evaluate financial results without the non-cash income/gain/loss effects from the OCSI and OSI2 Mergers[25](index=25&type=chunk) - The primary adjustments exclude amortization/accretion of interest income and realized/unrealized gains/losses that result solely from the cost basis established by merger accounting (ASC 805)[26](index=26&type=chunk)[28](index=28&type=chunk) - Adjusted Net Investment Income also excludes capital gains incentive fees (Part II incentive fees)[28](index=28&type=chunk) [Reconciliation Tables](index=7&type=section&id=Reconciliation%20Tables) This section provides detailed reconciliations of GAAP to non-GAAP financial measures for the three months ended June 30, 2025, and comparative periods. For the current quarter, GAAP total investment income of $75.3 million was adjusted by ($1.0 million) to arrive at adjusted total investment income of $74.3 million. Similarly, GAAP net investment income of $33.5 million was adjusted to $32.5 million Reconciliation of GAAP to Adjusted Total Investment Income | Reconciliation (Q3 2025, $ in thousands) | Amount | | :--- | :--- | | **GAAP total investment income** | **$75,271** | | Merger accounting adjustments | $(974) | | **Adjusted total investment income** | **$74,297** | Reconciliation of GAAP to Adjusted Net Investment Income | Reconciliation (Q3 2025, $ in thousands) | Amount | | :--- | :--- | | **GAAP net investment income** | **$33,481** | | Merger accounting adjustments | $(974) | | Part II incentive fee | $0 | | **Adjusted net investment income** | **$32,507** | [Consolidated Financial Statements](index=9&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's consolidated financial position and operational results, including assets, liabilities, and income statements [Consolidated Statements of Assets and Liabilities](index=9&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) As of June 30, 2025, OCSL reported total assets of $2.96 billion, down from $3.08 billion at the end of the prior quarter. Total liabilities decreased to $1.49 billion from $1.60 billion, primarily due to a reduction in payables from unsettled transactions. Total net assets remained stable at $1.48 billion, resulting in a NAV per share of $16.76 Consolidated Statements of Assets and Liabilities | ($ in thousands) | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Total investments at fair value | $2,809,377 | $2,892,771 | | Total assets | $2,964,212 | $3,079,167 | | Total liabilities | $1,487,743 | $1,604,054 | | Total net assets | $1,476,469 | $1,475,113 | [Consolidated Statements of Operations](index=10&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2025, the company generated total investment income of $75.3 million and incurred net expenses of $41.7 million, leading to net investment income of $33.5 million. After accounting for $4.9 million in net realized and unrealized gains, the net increase in net assets from operations for the quarter was $38.4 million, or $0.44 per share Consolidated Statements of Operations (Three months ended June 30, 2025) | ($ in thousands) | Three months ended June 30, 2025 | | :--- | :--- | | Total investment income | $75,271 | | Net expenses | $41,734 | | Net investment income | $33,481 | | Net realized and unrealized gains (losses) | $4,871 | | **Net increase in net assets from operations** | **$38,352** |

Core Viewpoint - Oaktree Specialty Lending Corporation reported its financial results for the fiscal quarter ended June 30, 2025, highlighting a decrease in total investment income and net investment income, while maintaining a stable net asset value per share [1][3]. Financial Highlights - Total investment income for the third fiscal quarter of 2025 was $75.3 million ($0.85 per share), down from $77.6 million ($0.90 per share) in the previous quarter [5][11]. - Adjusted total investment income was $74.3 million ($0.84 per share) for the third fiscal quarter, compared to $77.2 million ($0.90 per share) in the second fiscal quarter [5][11]. - GAAP net investment income was $33.5 million ($0.38 per share), a decrease from $39.1 million ($0.45 per share) in the prior quarter [5][11]. - Adjusted net investment income was $32.5 million ($0.37 per share), down from $38.7 million ($0.45 per share) in the previous quarter [5][11]. Portfolio and Investment Activity - As of June 30, 2025, the fair value of the investment portfolio was $2.8 billion, consisting of investments in 149 companies [16][17]. - The company originated $147.2 million in new investment commitments and received $249.4 million from prepayments and exits during the quarter [5][12]. - The weighted average yield on new debt investments was 9.1% [5]. Debt and Liquidity - Total debt outstanding was $1,460.0 million, with a total debt to equity ratio of 0.99x and a net debt to equity ratio of 0.93x [5][26]. - Liquidity included $79.8 million in unrestricted cash and $650.0 million in undrawn capacity under the credit facility [24][25]. - The company amended its syndicated credit facility, reducing interest rate margins and extending the maturity dates [5][10]. Distribution Declaration - A quarterly cash distribution of $0.40 per share was declared, payable on September 30, 2025, to stockholders of record on September 15, 2025 [6][4].

[PART I — FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements](index=2&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents Oaktree Specialty Lending Corporation's unaudited consolidated financial statements, detailing assets, operations, and cash flows, reflecting decreases in total assets and net investment income [Consolidated Statements of Assets and Liabilities](index=3&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) Consolidated Statements of Assets and Liabilities Highlights (in thousands USD) | Metric | June 30, 2025 (unaudited) | September 30, 2024 | | :--- | :--- | :--- | | Total investments at fair value | $2,809,377 | $3,021,279 | | Total assets | $2,964,212 | $3,198,341 | | Total liabilities | $1,487,743 | $1,710,530 | | Total net assets | $1,476,469 | $1,487,811 | | Net assets per common share | $16.76 | $18.09 | - Total assets decreased from **$3.20 billion** at September 30, 2024, to **$2.96 billion** at June 30, 2025, primarily due to a reduction in the fair value of investments and lower credit facilities payable[10](index=10&type=chunk) [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Consolidated Statements of Operations Highlights (in thousands USD, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total investment income | $75,271 | $94,966 | $239,486 | $286,980 | | Net expenses | $41,734 | $50,391 | $122,051 | $156,849 | | Net investment income | $33,481 | $44,575 | $116,838 | $130,131 | | Net increase (decrease) in net assets from operations | $38,352 | $1,120 | $9,342 | $20,992 | | Earnings (loss) per common share | $0.44 | $0.01 | $0.11 | $0.26 | - Total investment income for the three months ended June 30, 2025, decreased to **$75.3 million** from **$95.0 million** in the prior-year period, primarily due to lower interest income[13](index=13&type=chunk) - Net investment income also decreased to **$33.5 million** from **$44.6 million**[13](index=13&type=chunk) [Consolidated Statements of Changes in Net Assets](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) - For the nine months ended June 30, 2025, net assets decreased by **$11.3 million**[15](index=15&type=chunk) - This was driven by distributions to stockholders of **$123.6 million**, which exceeded the **$9.3 million** net increase from operations and **$102.9 million** net increase from capital share transactions (primarily a **$100 million** private placement)[15](index=15&type=chunk) Changes in Net Assets (Nine Months Ended June 30, 2025, in thousands USD) | Description | Amount | | :--- | :--- | | Net assets at beginning of period | $1,487,811 | | Net increase from operations | $9,342 | | Distributions to stockholders | ($123,631) | | Net increase from capital share transactions | $102,947 | | **Net assets at end of period** | **$1,476,469** | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Highlights (Nine Months Ended, in thousands USD) | Activity | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $227,038 | ($76,433) | | Net cash provided by (used in) financing activities | ($229,115) | $38,462 | | Net increase (decrease) in cash | $1,256 | ($38,225) | - For the nine months ended June 30, 2025, net cash from operating activities was positive **$227.0 million**, a significant shift from a use of **$76.4 million** in the prior-year period[17](index=17&type=chunk) - This was primarily due to higher proceeds from sales and repayments of investments (**$871.8 million**) compared to purchases (**$739.4 million**)[17](index=17&type=chunk) - Financing activities used **$229.1 million** in cash, driven by net repayments of borrowings under credit facilities (**$200.0 million**) and distributions paid (**$114.1 million**), partially offset by proceeds from a private placement (**$100.0 million**)[17](index=17&type=chunk) [Consolidated Schedule of Investments](index=7&type=section&id=Consolidated%20Schedule%20of%20Investments) Portfolio Investment Summary (June 30, 2025, in thousands USD) | Investment Type | Cost (in thousands) | Fair Value (in thousands) | % of Net Assets | | :--- | :--- | :--- | :--- | | Control Investments | $377,134 | $230,697 | 15.6% | | Affiliate Investments | $59,044 | $55,978 | 3.8% | | Non-Control/Non-Affiliate Investments | $2,576,411 | $2,522,702 | 170.9% | | **Total Portfolio Investments** | **$3,012,589** | **$2,809,377** | **190.3%** | - As of June 30, 2025, the total investment portfolio had a fair value of **$2.81 billion**, down from **$3.02 billion** at September 30, 2024[10](index=10&type=chunk)[37](index=37&type=chunk) [Notes to Consolidated Financial Statements](index=31&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=90&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's business overview, economic environment, and detailed financial analysis, highlighting decreased investment income and expenses, while maintaining sufficient liquidity - Management notes that global financial markets have experienced increased volatility due to higher inflation and elevated interest rates, but as inflation has eased, the Federal Reserve has relaxed monetary policies[334](index=334&type=chunk) - The company believes attractive risk-adjusted returns can still be achieved in the middle market[334](index=334&type=chunk) - Oaktree's investment focus is on situational lending, select sponsor lending, stressed sector/rescue lending, and public credit opportunities, particularly during market dislocations[332](index=332&type=chunk) [Portfolio Composition](index=95&type=section&id=Portfolio%20Composition) - During the nine months ended June 30, 2025, the company originated **$752.3 million** of investment commitments and received **$881.2 million** of proceeds from prepayments, exits, and sales[355](index=355&type=chunk) Portfolio Composition by Type (Fair Value %) | Investment Type | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Senior secured debt | 83.40% | 85.21% | | Debt investments in the JVs | 5.69% | 5.35% | | Subordinated debt | 4.92% | 3.64% | | Common equity and warrants | 2.85% | 2.85% | | Preferred equity | 2.61% | 2.20% | | LLC equity interests of the JVs | 0.53% | 0.75% | - The portfolio's largest industry concentration by fair value as of June 30, 2025, is Application Software at **18.03%**[357](index=357&type=chunk) [The Joint Ventures](index=98&type=section&id=The%20Joint%20Ventures) - The company co-invests through two joint ventures: Senior Loan Fund JV I, LLC (SLF JV I) and OCSI Glick JV LLC (Glick JV)[354](index=354&type=chunk) Joint Venture Investment Summary (June 30, 2025, in millions USD) | Joint Venture | Company's Investment (Fair Value) | Portfolio Size (Principal) | Number of Borrowers | | :--- | :--- | :--- | :--- | | SLF JV I | $127.5 million | $339.1 million | 52 | | Glick JV | $47.1 million | $111.4 million | 42 | [Results of Operations](index=100&type=section&id=Results%20of%20Operations) - Total investment income decreased by **20.7%** for the third quarter and **16.5%** for the nine months ended June 30, 2025, compared to the prior-year periods[373](index=373&type=chunk)[374](index=374&type=chunk) - This was primarily due to lower interest income resulting from decreases in reference rates, the impact of certain investments placed on non-accrual, and a smaller average investment portfolio[373](index=373&type=chunk)[374](index=374&type=chunk) - Net expenses decreased by **17.2%** for the third quarter and **22.2%** for the nine months ended June 30, 2025, compared to the prior-year periods[375](index=375&type=chunk)[376](index=376&type=chunk) - The decrease was mainly driven by a significant reduction in Part I incentive fees due to the implementation of a total return hurdle, as well as lower management fees and interest expense[375](index=375&type=chunk)[376](index=376&type=chunk) - For the nine months ended June 30, 2025, the company recorded net realized losses of **$24.0 million** and net unrealized depreciation of **$83.1 million**[380](index=380&type=chunk)[383](index=383&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=101&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, the company had **$79.8 million** in cash and cash equivalents and **$650.0 million** of undrawn capacity on its credit facilities[389](index=389&type=chunk) - The company's asset coverage ratio was **199.86%** as of June 30, 2025, and its net debt-to-equity ratio was **0.93x**[385](index=385&type=chunk)[386](index=386&type=chunk) - Total unfunded commitments were **$305.3 million** as of June 30, 2025, composed of **$278.2 million** to portfolio companies and **$27.1 million** to the JVs[391](index=391&type=chunk) - On February 27, 2025, the company issued **$300.0 million** of **6.340%** unsecured notes due 2030[233](index=233&type=chunk) - The **3.500%** notes due 2025 matured and were repaid in February 2025[245](index=245&type=chunk) - On May 14, 2025, the company repaid all outstanding borrowings under the OSI2 Citibank Facility, which was then terminated[229](index=229&type=chunk) - This resulted in an acceleration of **$3.1 million** in deferred financing costs[230](index=230&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=109&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are valuation and interest rate fluctuations, with a significant portion of its debt portfolio exposed to floating rates - The company's primary market risks are valuation risk for investments without a readily available market price and interest rate risk affecting both funding costs and investment income[439](index=439&type=chunk)[440](index=440&type=chunk)[441](index=441&type=chunk) Interest Rate Sensitivity Analysis (as of June 30, 2025, in thousands USD) | Basis Point Change | Approximate Annualized Net Change in Net Assets (in thousands) | | :--- | :--- | | +200 | $19,084 | | +100 | $9,542 | | -100 | ($9,356) | | -200 | ($18,090) | [Item 4. Controls and Procedures](index=111&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[446](index=446&type=chunk) [PART II — OTHER INFORMATION](index=111&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=111&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any pending material legal proceedings - As of the report date, the company is not a party to any material legal proceedings[449](index=449&type=chunk) [Item 1A. Risk Factors](index=111&type=section&id=Item%201A.%20Risk%20Factors) This section highlights a new risk factor regarding the potential adverse effects of tariffs on the company or its portfolio companies - A new risk factor has been added, stating that existing or new tariffs could adversely affect the company or its portfolio companies by increasing costs or reducing demand[450](index=450&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=111&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities[451](index=451&type=chunk) [Item 3. Defaults Upon Senior Securities](index=111&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities - There were no defaults upon senior securities[452](index=452&type=chunk) [Item 5. Other Information](index=111&type=section&id=Item%205.%20Other%20Information) No officers or directors adopted or terminated Rule 10b5-1 trading plans during the three months ended June 30, 2025 - No officers or directors adopted or terminated any Rule 10b5-1 trading arrangements during the quarter[454](index=454&type=chunk) [Item 6. Exhibits](index=112&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data

Core Viewpoint - Oaktree Specialty Lending Corporation (NASDAQ: OCSL) is rated as a Hold for income-focused investors interested in business development companies (BDCs) [1] Group 1: Company Performance - The stock price of Oaktree Specialty Lending Corporation has decreased by 19.92% over the past 12 months [1] - This decline has resulted in a relatively high annual yield of 11.25% [1] Group 2: Analyst Background - David A. Johnson, the founder and principal of Endurance Capital Management, has over 30 years of investment experience and holds multiple advanced degrees in finance and business [1]

Core Viewpoint - Oaktree Specialty Lending Corporation will report its financial results for the third fiscal quarter on August 5, 2025, before the market opens, followed by a conference call to discuss the results [1]. Company Overview - Oaktree Specialty Lending Corporation (NASDAQ:OCSL) is a specialty finance company focused on providing customized credit solutions to companies with limited access to public or syndicated capital markets [3]. - The company's investment objective is to generate current income and capital appreciation through flexible financing solutions, including first and second lien loans, unsecured and mezzanine loans, and preferred equity [3]. - Oaktree Specialty Lending is regulated as a business development company under the Investment Company Act of 1940 and is managed by Oaktree Fund Advisors, LLC, an affiliate of Oaktree Capital Management, L.P. [3]. Conference Call Details - The conference call to discuss the financial results will take place on August 5, 2025, at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time [1]. - Access to the conference call can be made by dialing (877) 507-3275 for U.S. callers or +1 (412) 317-5238 for non-U.S. callers, with the reference to "Oaktree Specialty Lending" [1]. - A replay of the conference call will be available on the company's website or by dialing (877) 344-7529 for U.S. callers or +1 (412) 317-0088 for non-U.S. callers, starting approximately one hour after the broadcast [2].

Group 1 - The article expresses skepticism regarding the near- to medium-term return prospects for business development companies (BDCs) due to lower base rates, higher long-term yields, shallow leveraged buyout (LBO) and merger & acquisition (M&A) volumes, and an increasing supply of new private credit [1] Group 2 - Roberts Berzins has over a decade of experience in financial management, focusing on helping top-tier corporates shape financial strategies and execute large-scale financings [1] - Berzins has contributed to institutionalizing the Real Estate Investment Trust (REIT) framework in Latvia to enhance the liquidity of pan-Baltic capital markets [1] - His policy-level work includes developing national State-Owned Enterprise (SOE) financing guidelines and frameworks for channeling private capital into affordable housing [1]

Group 1 - Oaktree Specialty Lending (NASDAQ: OCSL) is currently trading at a 16% discount from its net asset value, indicating potential for price recovery [1] - The company has a catalyst in its portfolio related to credit performance, which may enhance its rebound prospects in 2025 [1] - Oaktree Specialty Lending has recently cut its dividend, which may impact investor sentiment [1]